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LOS ANGELES — Any foreign movie knocking on China’s door must pass through powerful gatekeepers — the China Film Group and its chief executive, Han Sanping.
The China Film Group functions as the Chinese government’s guardian of a film market that recently shot past Japan’s to become the world’s second-largest in box-office receipts behind the United States. On a broad array of business dealings — censorship, distribution and co-productions, among others — it is the conduit for foreign moviemakers hoping to make or distribute films in China.
But Mr. Han and his group are also supervising a trade route that is suddenly under close watch by regulators in Washington, after reports last week that officials in the United States are examining whether American film companies have violated domestic law by making illegal payments to officials in China.
In March, the Securities and Exchange Commission wrote to major film companies and smaller competitors — including Walt Disney, 20th Century Fox and DreamWorks Animation — requesting information about their business practices in China, according to people with knowledge of the investigation, who spoke on condition of anonymity because the matter could end up in court.
The investigation was set off by a whistle-blower, one of the people said. It is not known specifically which American business dealings with China are under investigation, but this person said the Hollywood companies were told to freeze all files, e-mails and other data related to getting films made or distributed in China. Several people briefed on the letters described some aspects of them, but all spoke on condition of anonymity because of confidentiality strictures.
While the letters are said to include no specific reference to China Film, executives scrambling to comply with the request are preparing as if their dealings with the group are part of the inquiry because of its all-important role in getting films made in China, according to executives based in the United States and in China.
The S.E.C. inquiry, which would have direct legal consequences only for companies with an American presence, is certain to make Hollywood studios that do business in China even more wary of possible missteps.
It has also focused fresh attention on the official Chinese apparatus for making and distributing films, beginning with the State Administration of Radio Film and Television and extending to the China Film Group, a state-controlled entity without whose support a foreign film is not allowed to enter China.
“It’s the equivalent of Universal, Sony, the M.P.A.A. and Regal all tied up in one,” said an American producer who has done business extensively in China. His description compared the China Film Group to a pair of major studios, the Motion Picture Association of America trade group, and America’s largest theater chain, Regal Entertainment Group, but with the added authority of a government franchise.
In China film circles, Mr. Han’s name requires little explanation: He is called “Master Han” or “the godfather of the Chinese movie industry.”
He had a role in directing “The Founding of a Republic,” and “Beginning of the Great Revival,” a pair of patriotic Chinese epics about Mao and the founding of the Communist Party.
That role comes atop producing credits on more than four dozen movies, most of them Chinese, but at least two — “The Karate Kid,” from Sony Pictures Entertainment, and “Mission: Impossible III” — that were made by Hollywood studios for global markets with involvement by the China Film Group.
In person, Mr. Han, who speaks little or no English, can nevertheless come across as an almost stereotypical Hollywood producer, an acquaintance said. He is demonstrative and colorfully expressive when speaking, and appears eager to befriend and be seen with Western movie stars, the acquaintance said.
Spokesmen for Sony and Paramount declined to discuss the dealings by their companies with Mr. Han. One person briefed on “The Karate Kid,” which was released in 2010, said the China Film Group was entitled to designate an executive producer in return for its financial contribution to the film — about $5 million of a $40 million budget — and chose Mr. Han in his role as chief of the film group. Spokesmen for all of the major studios and DreamWorks Animation declined to discuss the current investigation, or did not respond to queries.
In a telephone interview Saturday, Mr. Han said he was unaware of the S.E.C. investigation. Asked whether he had ever seen evidence of improper payments involving American companies, he said through a translator: “How would I know about this? I don’t even have a clue.”
Separately, Yuan Wenqiang, the general manager of the China Film Group’s import-export unit, said the group nature of film distribution decisions in China left “little room” for bribery.
Mr. Han said his group assisted in the filming of “Mission: Impossible III” in China, but did not back it as a co-production. “My work is not only going through the administrative process, but also a substantial amount of groundwork to make sure the shooting could go smoothly inside China,” he said. “As the president of C.F.G., I have this responsibility.”
It was not so long ago that film in China was a medium largely for propaganda. But in recent years moviemaking has opened up to outside influence, and now includes what for China are newer genres like romantic comedy.
As China’s central planners try to steer the economy toward consumerism from manufacturing, they are trying to double the share contributed to the economy by filmed entertainment and other media in the next five years. Movies are seen as an essential component of Beijing’s plan to drive consumer spending into the nation’s vast interior.
Hollywood has been keen to further expand in this growing market. In February, high level discussions between the United States and China produced an agreement granting American studios the right to release more films each year in China, and to keep a greater percentage of the box-office revenue. DreamWorks Animation is building a studio in Shanghai, and Disney’s Marvel Entertainment unit plans to shoot part of “Iron Man 3” in China with financing from Beijing-based DMG Entertainment. But many in the entertainment industry in China say American media executives know the difference between entertaining officials and bribing them.
Stephen L. Saltzman, an entertainment law specialist in Los Angeles for Loeb & Loeb, said he had not seen evidence of corruption in his experience with the Chinese-related films. “I have in all of my dealings not encountered anything,” said Mr. Saltzman, who spoke by telephone last week. “These are very sophisticated companies who understand the rules.”
Film executives around the world have long understood the authority invested in the China Film Group. In an unusually detailed assessment of the Chinese film market last year, the Italian Trade Commission — relying on interviews and industry databases to make sense of a poorly understood and rapidly changing system — found the group at virtually every point of entry for a foreign movie. Only the Huaxia Film Group and the China Film Distribution Company were authorized to distribute imported films, the commission reported.
(Mr. Han said Huaxia operates separately; the Italian report described Huaxia as being owned by a group of companies that includes the China Film Group. Huaxia and the China Film Group sometime subcontract distribution to others, it said.)
Co-productions with Chinese companies by foreign producers are subject to the authorization of the China Film Co-Production Company, a China Film Group unit, the report said.
Submission to the Chinese censors, who typically spend 15 to 30 business days reviewing a film and sometimes demand changes, again runs through the film group. Several of the largest theater chains, the commission found, were at least partly owned by the group.
On a visit to Los Angeles in March, about two weeks before the S.E.C. sent its letters, Mr. Han was received in a manner that matched his obvious power in China. He was widely reported to have visited with high executives at Sony, Universal and Disney, and to have paid a call on Bruce Willis, who is starring in a coming film, “Looper,” that was shot partly in Shanghai, with backing from China. Mr. Han was accompanied by Dan Mintz, an American-born advertising executive based in China who is among the producers of “Looper.”
Mr. Mintz, in a 2006 profile in the magazine Fast Company, was called a master of “guanxi,” the Chinese art of using relationships and clout to navigate potential impediments. In April, Marvel announced that Mr. Mintz and his company, DMG Entertainment, would join in making “Iron Man 3” under a co-production deal that would help to cement its access to the Chinese market when the film is released in May 2013.
Mr. Mintz and spokesmen for Disney and Marvel declined to discuss details of their alliance.
Source: NYT
